Late Payment & Retentions: What Government’s Proposing-Webinar Recap

Nicola Walters, Business Environment Lead for Construction and Infrastructure, provided a detailed walkthrough of the proposals, outlining what the changes could mean in practice if implemented. She was joined by Fergus Harradence, Deputy Director for Construction, Logistics, Airports and Water, who engaged directly with Members, listening to their views and helping to clarify key points. 

NFRC encourages all Members to take a few minutes to submit their own response to this important consultation. Our step-by-step guidance is available here. 

You can also view DBT’s presentation slides here and watch a recording of the webinar below. 

Law Changes DBT is Consulting On: 

Government has tabled a legislative package to tackle late, long and disputed payments across the economy, plus a construction-specific measure on retentions. Key elements below. 

1. Audit & board scrutiny (large companies) More structured board/audit-committee oversight of payment practices. 

2. Maximum payment terms A fixed ceiling of 60 days for payment terms across sectors (with an intention to review reducing further later). 

3. Deadline to dispute invoices A defined verification period (indicatively 30 days) after which undisputed invoices become payable (including statutory interest). 

4. Mandatory statutory interest Late payments to carry a mandatory interest rate (e.g. 8% above base) rather than left to discretion. 

5. Reporting on statutory interest (large companies) Large reporters to publish the interest they owed vs. actually paid. 

6. Penalties for persistent late payers (large companies) Use published data to identify and fine repeat offenders. 

7. Stronger Small Business Commissioner (SBC) Assurance of reported data and power to initiate investigations (note: construction adjudication remains separate). 

8. Retentions in construction contracts (two options) 

Option A — Ban retentions: Amend the Construction Act to prohibit retention clauses in new contracts after a transition period. Alternative mechanisms would be left to the market. 

Option B — Protect retention sums: Allow retentions only if immediately protected (trust) via a segregated account and/or an instrument of guarantee. Proposed features include: 

• Single deduction (one retention sum only) around final payment, covering the defects period. 
• Automatic segregation and automatic release at due date unless notified defects. 
• Interest earned belongs to the payee. 
• Records/reporting, existing Construction Act dispute routes, and implied terms where contracts are silent. 

Other reporting change:
Move some large-company payment reporting from twice-yearly to annual if new data points are added. 

Respond to the consultation

Unfair payers are fighting hard to block these changes, don’t let them drown out your voice and make sure you’re heard. This consultation is UK-wide and includes the devolved nations – it closes on October 23rd. It can be completed by anyone within your business you judge to be suitable, though MDs and CFOs are likely best placed.   

This page of step-by-step guidance will help you submit your own response, choose the option that works best for you in terms of your perspective on the changes and the time you have available.  

If you have any thoughts on the government's proposals you wish to share with NFRC to inform our own response to the consultation, please contact [email protected]